[lordofgibbons]

How are situations like lack of liquidity to pay the taxes handled?

i.e, As an employee you get stock options, which you exercise when you leave the startup. Then long before the company has a liquidity event the FMV shoots up because the business is doing well. How do you as a wage worker pay the taxes on your paper riches without a way to sell your shares?

[temp2441139]

I guess there would be all sorts of megacorps happy to loan you money for this with your assets as collateral.

Remember London and Amsterdam have extremely strong finance industry lobbying, and that shows up in their lawmaking.

[itake]

I know several people that got cleaned out in IPOs partially due to how taxes work on no-liquidity (lockout) periods. If you IPO'd at $10 ($3 goes to the tax man), and when you can finally sell it 6mo later and stock is only worth about $3, the IRS makes more money than you.

Checkout what happened at Uber [0].

My cousin at Aurora borrowed money for his tax bill on IPO. I don't know the final numbers, but I hope he at least broke even.

Real examples include: $GRAB, $AUR, $UBER

[0] - https://www.cnbc.com/2020/08/28/nearly-200-uber-employees-su...

[varenc]

Isn't this already a problem in many situations? If you exercise your options when you quit, pay only a very small strike price, but acquire private shares with a much larger fair market value, in the US at least you'd owe the IRS a lot of money but have no liquidity to pay it. Though this new tax would make that a yearly problem instead of just a problem when you exercise. (and mean that early exercise doesn't let you avoid it)

[nimih]

I think in that case, you, the hypothetical wage worker, got hoodwinked pretty effectively by the beancounters when they were able to get away with compensating you in contracts that are apparently worthless to you.

[bpodgursky]

Do you think about the things you say, or is it just reflex?

Everyone working for a startup knows it may be 5 years to a liquidity event. We're all big boys, we work on uncertainty and expectation. If the government changes the rules halfway through, it's pretty brain-damaged to blame the beancounters for hoodwinking the employees, and not using their magic oracular powers to predict how the laws would change under their feet.

[nimih]

Do you not factor in the risk of government tax policy changing when you make large financial decisions? I certainly do (for instance, when I choose between traditional and Roth contributions for my 401k, or when I was purchasing a new car a few years back), and it doesn't strike me as a particularly difficult thing to do; I think I may have even done so the last time I was hired for a job which offered options (although that was quite a while ago and my memory is hazy).

More to the point, however, I think if 2 years is insufficient notice to get your tax situation in order w/r/t employee stock options, either your finances are enough of a mess, or you're frankly just so stupid, that you would not be helped much more with 5 years, or even 10 years, of advance notice. And at that point, you (the poster, not the hypothetical hapless employee) are just arguing that the government should never change its tax policy, which is just absurd.

[lordofgibbons]

5 years used to be true 15 years ago. IPOs are happening much later now, probably 10+ years, if you're lucky

[monero-xmr]

You need to exit the Netherlands